How to Invest in Unlisted Shares in India: A Complete Guide
Unlisted shares provide investors with an opportunity to invest in companies before they go public. These stocks are not listed on stock exchanges like the NSE or BSE but can offer significant long-term returns if the company performs well. Investing in unlisted shares requires an understanding of the process, risks, and potential rewards. In this guide, we will explain how to invest in unlisted shares in India, the benefits, risks, and key considerations.
What Are Unlisted Shares?
Unlisted shares are the equity shares of a company that is not publicly traded on stock exchanges. These shares can be bought and sold through private transactions, intermediaries, or specialized platforms. Companies like Ola Electric, boAt, PharmEasy, Reliance Retail, and HDB Financial Services are examples of firms whose shares are currently unlisted but may go public in the future.
Why Invest in Unlisted Shares?
Investing in unlisted shares can be highly rewarding due to the following reasons:
Early Access to Growth Companies: Get exposure to startups and emerging businesses before they go public.
Potential for High Returns: If an unlisted company gets listed, its stock price may surge, offering significant returns to early investors.
Portfolio Diversification: Unlisted shares provide an alternative asset class beyond traditional stocks and mutual funds.
Pre-IPO Advantage: Investing before an IPO allows investors to gain from early-stage valuations.
How to Buy Unlisted Shares?
There are multiple ways to purchase unlisted shares in India:
Through Brokers and Intermediaries
Several brokerage firms and investment platforms specialize in unlisted shares.
Platforms like Tathya Capital facilitate buying and selling of unlisted stocks securely.
Buying from Employees (ESOP Sales)
Many startups and private companies offer Employee Stock Option Plans (ESOPs).
Employees looking to liquidate their ESOPs sell them to interested buyers.
Investing Through AIFs or PMS
Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) allow high-net-worth individuals (HNIs) to invest in unlisted stocks.
Directly from the Company
In some cases, companies may sell their shares directly to institutional or retail investors before listing.
Risks & Considerations
Before investing in unlisted shares, consider the following:
Liquidity Risk: Unlisted shares are not easily tradable like listed stocks.
Valuation Challenges: Pricing of unlisted shares is not transparent and depends on demand and supply.
Regulatory Risks: SEBI and RBI regulations on unlisted securities can impact investments.
Company Performance: Since financial data is not as easily available as listed firms, research is crucial.
Unlisted shares present a unique opportunity for investors looking to gain early exposure to high-growth companies. However, thorough research and due diligence are essential before investing. Platforms like Tathya Capital can help investors navigate the complexities of buying and selling unlisted shares securely. If done correctly, investing in unlisted shares can be a profitable strategy for long-term wealth creation.